Effective negotiation strategies are important for your business when entering into a contract. First and foremost, you want to ensure that you fully negotiate the terms and conditions of the potential deal that you are about to enter into with the other party. This negotiation will take place during the negotiation process, and will be handled via in-person meetings so that both parties fully understand what the other party is looking to accomplish.

Negotiation Formats

There are two main types of negotiation formats:

  1. Positional bargaining
  2. Principled negotiation

Positional Bargaining

Positional bargaining, or distributive negotiation, is a more confrontational negotiation approach whereby both parties take a strong position as to what it is they want. This will include a position based on their short-term and long-term objectives, what they want to achieve from the contract, and what their goals are after the contract is complete. When utilizing this type of negotiation method, remember that each party will have different viewpoints as to what the contract should entail – this will include a difference in what the party wants for any one or more of the following areas:

  1. Length of time that the contract will take place
  2. Cost of the project
  3. Amount of goods involved if it involves the sale of goods
  4. What type of service is going to be conducted if it’s a service contract
  5. Expectations
  6. Limitations
  7. How and when the payment will be due

Such issues will arise, and both parties will need to slowly come to an agreement on each and every issue. Since each party will have a different opinion on what it is they expect out of the contract, the meetings could be more hostile and argumentative as the parties will likely be hesitant on coming to an agreement. However, with time, the parties can try to find a mutual understanding as to certain terms and provisions that will be included in the contract.

Principled Negotiation

The principled negotiation format is quite the opposite of the positional bargaining approach. It provides that both parties come together to coordinate with one another as to how each party will act under the contract to reach and achieve the goal(s) set out by both parties.

Instead of coming in with a firm position, the parties will come in and discuss each of their objectives and what they are hoping to gain from the contract. Thereafter, the other party will have a chance to think of ideas for enhancing the contract to meet the needs and wants of both parties involved. This type of approach provides for a better relationship and collaboration between the parties to prevent any disputes in the future.

Negotiation Styles

In addition to the two common negotiation formats, there are some unique negotiation styles that the parties can utilize when undergoing the negotiation process. There are generally five styles that most parties use, and these include:

  1. Competing
  2. Collaborating
  3. Compromising
  4. Avoiding
  5. Accommodating

Each one has its own benefits and drawbacks, and one style might be ideal to use over another depending on the type of party you are entering into a deal with. The competing style is the most argumentative style out of the five above. Similar to the positional bargaining approach, the competing style will see the negotiation process as a competition. Therefore, this business will want to go into the process with a view that it won’t negotiate at all.

The second style, the collaborating style, is very similar to the principled negotiation format in that the party will enter the process with the goal of collaborating with the other party in hopes to establish a trusted relationship.

The compromising style is similar to the collaborative style. The party is willing to compromise, or give in to a point. Therefore, the party is willing to give up some items that it might want to see in the contract for the sake of having the other party happy.

The avoiding style is a passive aggressive type of style in that the party will want to avoid any confrontation. It’s similar to the collaboration and compromising style, except that the party will do everything to avoid an argument.

The accommodating style is a submissive style whereby the party will simply want to keep the other party satisfied, and is really willing to enter into an agreement by giving the other party what it wants.

If you need help coming up with an effective contract negotiation strategy, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5-percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures and Airbnb.